An assumption made in traditional cost accounting books is that variable costs move proportionately with revenues. Recent studies in management accounting literature suggest that the magnitude of the change in the costs does not only depend on the magnitude of the change in the cost driver, but also of the direction of this change (ascending or descending). To define this situation, numerous authors refer to sticky costs.
The motivation of this work is to test if the concept of sticky costs is observed in banks as a way to improve the generalization of Anderson, Banker and Janakiraman (2003) idea because cost structures and scale economies are likely to be similar across firms in the same industry (Balakrishnan and Gruca, 2008; Balakrishnan et al., 2004).
The analysis confirms the validity of existing literature on sticky costs even when controlling for cost structure. The results show that sticky costs are observed also in banks of
A second set of results suggests that cost structure and economic climate are valid explanations for cost behavior. The cost structure of banks in each country affects the level of cost responses to increases and decreases in demand. Banks with higher proportions of fixed costs, such as